San Diego historic homeowners face an extra fee

Larry Patterson, an owner of a historic home in Ocean Beach, just paid his $492 inspection fee to the city of San Diego. “We still save money, but it’s not as much,” said Patterson, referring to his participation in the city's Mills Act program. “On the other hand, (the fee is) every five years … about $100 a year.”
— Peggy Peattie / Union-Tribune staff

Larry Patterson, an owner of a historic home in Ocean Beach, just paid his $492 inspection fee to the city of San Diego. “We still save money, but it’s not as much,” said Patterson, referring to his participation in the city's Mills Act program. “On the other hand, (the fee is) every five years … about $100 a year.”
— Peggy Peattie / Union-Tribune staff

1) The city of San Diego notifies property owners of upcoming inspections.

2) Homeowners can try to set up appointments with the inspector but are not required to do so. Senior planner Jodie Brown, the sole person doing the inspections, says she will try to accommodate schedules but can refuse to schedule on Saturdays and Sundays.

3) Upon arrival, Brown checks to make sure the house is visible from the public right-of-way, which is required if you’re in the Mills Act program. “You want to avoid that jungle look,” she said. The entire inspection is done from the outside.

4) Brown, who has a bachelor’s in history and a master’s in environmental planning, checks to see if the home is in good repair, looking for things such as holes and sagging porches.

5) She makes notes of any alterations, which she later researches to ensure that they were approved by the city or were already in place when designated.

$1,185: For historic home designation. (This is the first step, if people want to enter a Mills Act agreement.)

$590: For the Mills Act program agreement.

$949: Enforcement of the Mills Act agreement if violations occur. (Senior planner Jodie Brown said this is reserved for serious cases. She doesn’t expect the city will have to get to this point.)

Source: City of San Diego

Larry Patterson has been working on his historic home in Ocean Beach for 10 years, repairing the stone walls and refilling mortar between the brickwork — both hallmarks of a Craftsman-style home.

Patterson says the time, care and $4,000 spent on restoration have been worth it because he saves $2,000 every year in property taxes through a voluntary Mills Act agreement with the city of San Diego: He promised to maintain his historically designated property to a certain standard in exchange for tax savings.

This year, though, Patterson will save a bit less because of a $492 bill he unexpectedly received from the city for an inspection program that ensures he and other Mills Act participants are making good on their ends of the deal.

The Mills Act is a state law passed in 1972 and sponsored by then-state Sen. James R. Mills, D-Coronado. It reduces property taxes for participating homeowners by an average 50 percent. In 2009, San Diego’s independent budget analyst reported the city lost $1.1 million annually under the program. A current number is not available.

The inspection fee was part of a 2008 city reform of the program that stirred debate. Owners of historic homes said the $492 inspection fee, to be paid every five years, was steep and in some cases would negate the owners’ savings. Proponents said inspections would help preserve historic homes for future generations.

In 2009, the city’s historic homes division sent its first wave of bills to 200 of the 1,005 property owners in the Mills Act program. None were sent in 2010, but another 200 were sent in 2011 — likely explaining why some were confused to receive a request for payment this year. The department in charge of historic homes lost a senior planning position in 2010, which affected the process, said Cathy Winterrowd, principal planner and liaison to the city’s Historic Resources Board.

Patterson, 70, thought the fee was high but ultimately paid it.

“We still save money, but it’s not as much,” he said. “On the other hand, it’s every five years … about $100 a year.”

Under the program in San Diego, Mills Act participants pay a $590 application fee and sign a legal agreement promising to uphold certain maintenance standards in exchange for property-tax relief.

The $492 inspection fee pays for a city employee, senior planner Jodie Brown, to perform the inspections.

“We’re not trying to make money on it,” Winterrowd said.

So far, the city has received 304 payments out of 400 notices sent out in 2009 and this year, bringing in $149,568. Eight people are not renewing their Mills Act contracts, while six have received hardship waivers.

“(Brown) has gotten a number of property owners who’ve asked for additional time or hardship requests,” Winterrowd said.

“We are working with people. We explain what the fee covers; it’s a little under $500 every five years,” she said.

Winterrowd added that the fee is worth it, especially if homeowners are getting substantial tax savings.

“The average tax savings is about $8,000 a year for most people,” she said. “It’s well within the money that they are saving on an annual basis. But some people are saying it’s not worth it (because they’re not seeing as much in savings.)”

Nova Fraser, 72, who owns a historically designated home in Ocean Beach, decided not to renew for the Mills Act, out of principle.

“I was shocked,” said Fraser about the bill.

She said she’s never received a tax benefit because her property taxes are so low. She bought her one-bedroom cottage in 1976.